A Credit Score is so much more than what you think it is. Whether you are looking for a big-ticket loan or just getting started with the basics, a good Credit Score is an absolute must-have. Find out why.
Sandeep Munshi was denied a Home Loan despite drawing well over Rs 1 lakh per month for the last 3 years. The reason?
He has a poor credit history and a surprisingly low Credit Score.
Your Credit Score is a non-negotiable pre-qualifier if you are in the market for quality loan offers from major banks. Take the case of Sarah Kochhar, a senior research associate with a leading MNC who had never used a Credit Card or taken a loan.
Sounds like the ultimate finance goal, right?
Wrong.
Things were working out fine for Sarah until she decided to buy a car. When she approached her bank for a loan, they categorically turned her down citing her lack of credit history as a sufficient cause.
Additional Reading: 10 Myths About Credit Score And Credit Report
If you are scouting for Home Loans, there are two things you need to keep in mind regarding your Credit Score:
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A Good Credit Score Increases Your Chances Of Loan Approval
Having a good Credit Score is a definite plus when it comes to securing a top-notch Home Loan offer. It gives the lenders a sense of security regarding your repayment capabilities and hence, your application receives an immediate mark of approval.
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A Good Credit Score Puts You In Control
With a phenomenal Credit Score to boost, you are in a far greater position to negotiate your way through the nitty-gritty of Home Loans. For instance, your lender might agree to let you borrow at a lower rate of interest in due consideration of the fact that you have an excellent credit history. Not just that, with a good Credit Score you could get the processing fee and other miscellaneous charges waived off.
Before you get all worked up, maintaining a good Credit Score is not rocket science. In fact, more than the score itself, it’s the rookie mistakes and the minor lapses in judgement which land most people in trouble.
Additional Reading: Top 5 Reasons For Home Loan Rejection
What’s A Good Credit Score?
Credit Scores are generally categorised on a scale of 300-900. Someone who has never borrowed won’t have a Credit Score. If that sounds like you, you need to work this part out before you even begin to think of a Home Loan. Start with a basic Credit Card and check whether you can make small-ticket purchases on credit and pay them off in time. Explore tools like Short-Term Personal Loans to understand how repayment works before you move on to something as nuanced and complex as a Home Loan.
Additional Reading: FAQs On Short Term Personal Loans
Credit Score Of 750 And Above
Aim for a Credit Score that’s 750+. This Credit Score will bear testimony of your excellent credentials when you approach the banks for a loan. Additionally, it’ll give you the benefit of negotiating your loan rates and terms of repayment.
Credit Score In The Range Of 500-600
Any Credit Score that’s below 600 is likely to limit your choices to a handful of financial tools. What’s worse – you may have to settle for a lesser loan amount or pay a higher rate of interest. In such scenarios, it’s in your best interest to adopt a series of quick measures and get the score back on track.
The Way Forward For You
Since Home Loans involve a lot of commitments, monetary or otherwise, take some time to straighten out your Credit Score first. If you are unsure of where to start, here is what you need to know for starters:
Check Your Payment History
In the majority of cases involving low Credit Scores, the underlying cause is simple – there is a payment which has to be made. Check your Credit Card usage to see if there is an unpaid bill that’s eating into your credit history.
Frequent Loan Applications
If you have been rejected for a loan, don’t go about making a fresh application to the same creditor right away. Because every time the creditor pulls up your credit report, your Credit Score takes a hit. In such a situation, wait out a couple of months before you hit the go-button all over again.
Errors On Credit Report
Sometimes, you may stumble across a potential oddball scenario where your Credit Score seems lower than what it should be. Errors on credit reports are normal and many people fall victim to it every year. Monitor your Credit Score from time to time and report an error the moment you notice one.
Maintaining a good Credit Score is a matter of patience, a little bit of effort, and a lot of discipline. If you are all set, shall we get that Home Loan for you?